2016 looks rosy for small agencies as research reveals success and progression

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At a recent Drum Network event, Predicting Agency Futures; looking back and looking forward, I was privy to some interesting research about how 2015 had passed and what the outlook for 2016 was for agencies.

Steve Firth, managing partner, Gravity Thinking

Jim Law, founder of the marketing research company Wild Heather Research, presented his research into the state of the sector in 2016 which investigated agency life from profit margins to agency staff culture. The research spanned across all sectors within the creative industry; marketing, communications, advertising, digital and PR.

Firstly, it seems that small agencies are interested, interesting and collaborative in all areas of the industry whereas their larger peers seem to continue to sit in their ivory towers comfortable in the scale that they have created. Out of 80 respondents only 5% were from agencies with 50+ employees which startled me. And the room itself seemed to be brimming with enthusiastic, innovative, smaller agency principles taking time out of busy schedules to listen, learn and network.

Some staggering headlines…

On average agencies pitched over 20 times during 2015 with an average value of just £104,000 per project. With high expenses associated with pitching (both direct costs and resources) this can’t make for good business especially considering many of the pitches were for specific projects with no guaranteed opportunity to recoup pitch expenditure post project completion. At Gravity we have the principle of less is more – 3 pitches, 2 wins and £2.9m in budgets moving into 2016.

In advertising agencies, the boardroom is made up of 96% male employees. Astounding in today’s business world but true. Fortunately, this was not the case for digital agencies with 45% being female. I take heart that out of 24 people in our agency 12 are female with 2 of them sitting on a senior management team. We also have cultural diversity with Portugal, Brazil, Holland, Greece, The Czech Republic, France, South Africa, Australia and Ireland all being represented. It makes for a more interesting and open minded view on what we do, creating a truly diverse work space.

This is a young persons’ game with the average age of staff being 28, senior team being 37 and the board being 44. Not necessarily surprising as this is a fast paced, high energy industry that we work in and being immersed and connected to media, technology and culture are a prerequisite. At Gravity we correlate with this and focus on young bright talent with passion and potential – it's our role to provide the platform, support and experience for them to meet that potential.

At last collaboration is becoming mainstream with 60% of agencies having collaborated on new business pitches with a 66% success rate. And 86% of those collaborations were between people who already had a track record with one another. As an agency that prides itself on collaborating with interesting and diverse partners with expertise in many different fields (scientists, performers and technologists) this was good to hear. Have the days of thinking you can really do it all by yourself under one roof gone? Let’s hope so.

Are we finally learning to recruit and retain talent better? The average staff turnover in 2015 was 16% which is a positive sign that agencies are taking care of their people. Talent management and development has to be a key focus for agencies going forward with the pool of talent being quite small and the cost of recruitment being high. When you get good people in your business, you better take the time to nurture and look after them. One approach that is popular is to look ahead of a person’s time at the agency and align to their longer-term life goals. By doing so you are ensuring that the experience they have with you is additive to a greater personal purpose which in turn results in happier, more fulfilled and productive people who want to stay with you longer.

Most agencies are feeling positive about the future. In 2015, 8 out of 10 of the agencies saw an average increase in turnover of 36% which means that they’re all feeling rather positive about 2016 with 80% confident in the future. Too right. The ever evolving and fast moving world represents great opportunities for agencies who are smart, agile and brave. Those agencies who are willing to evolve and change with this world are well placed.

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